Some of the tax considerations are as follows. As mentioned in Chapter IV, you have a great deal of flexibility in exploiting your idea. You can use your idea yourself, contribute your idea to your own company, license your idea either to your own company or to an unrelated company, and sell your idea either to your own company or an unrelated company. Your own company, in turn, can use the idea, license the idea, or sell the idea. Each choice has different tax consequences. If you exploit your idea yourself, you will be a sole proprietor. A company, an entity separate from yourself, formed to exploit your idea could be either a partnership (general or limited) or a corporation (regular “C” corporation or an electing “S” corporation). Most states also recognize limited liability company and limited partnership association business entities. Which choice is the right choice depends upon your individual situation and the nature of your idea.
One key advantage of the corporate limited liability company and limited partnership association forms is limited liability. Other factors to be considered by you in the choice of structure in which to conduct your business are your other sources of income, the source of financing for the business, the method of capitalization of the business, and the degree of activity you will assume in the business.
One concern under the tax law prior to 1987 was the characterization of income as capital gains. Under prior law, capital gains were taxed at a significantly lower rate than ordinary income. At this printing, however, the tax rate on capital gains is the same as the tax rate on ordinary income but capped at 28 percent. Hence, today, characterizing income as capital gains is not of paramount importance. An individual’s tax concerns, under present tax law, lie in the avoidance of passive losses, the avoidance of limitations on deductions imposed by investment interest limitations, and the avoidance of limitations on deductions imposed by the “at risk” rules. Competent tax advice will address these concerns and will maximize the advantages of the taxpayer’s particular situation.
CHAPTER VI
here are many sources of help for inventors in the evaluation of their inventions, marketing of inventions, and starting and operating businesses based on inventions. However, invention development companies have caused many problems which have led to legislation protecting inventors in some states (see Chapter VII on “Fraudulent Invention Development Companies”). These resources are changing. Organizations come and go, change officers or contacts, and move around. Also, new resources are becoming available which were not in existence even a few months ago. Consequently, this chapter will give you some general suggestions and refer you to page 55 for the most up-to-date information on sources of inventor assistance. The business of providing assistance to inventors in marketing inventions, locating financial assistance, etc. is one which has become infested with fraud.
WHEREDOI
OBTAINHELP?
More information on this problem will be given in a later chapter, and more information on alternate sources will be given beginning on page 55.
Beware of commercial invention marketing or invention development services!!
If you still think your idea has commercial possibilities after you have read the foregoing, then you probably need to talk to an attorney who specializes in the relevant area of the law. An initial consultation of no more than an hour should be long enough in most cases for the attorney to get a basic understanding of your situation, to give you some basic advice, and to outline what additional services you require and to estimate how much those additional services would cost.
6.01 From an Attorney
Alternatively, you can obtain a copy of the entire roster of registered patent attorneys and agents throughout the US Write for
Pearson Education 800 East 96th St
Indianapolis, IN 46240
Directory of Intellectual Property Lawyers and Patent Agents to:
The fee is $195 plus shipping and handling.
You can obtain an excerpt of the official register free of charge by writing:
and asking for a list of patent attorneys and agents in your area. The Patent and Trademark Office will photocopy the pertinent portion of the register and promptly send it to you. If you are interested in a patent attorney or agent in a city other than where you live, you should state this in your letter.
Commissioner of Patent and Trademarks Box OED (Office of Enrollment and Discipline) Washington, DC 20231
The USPTO has a web site that can be accessed for information regarding practitioners throughout the United States registered to practice before the Patent Office. At the PTO home page, http://www.uspto.gov/
You can also consult with your nearest city, country or state bar association lawyer referral service for a referral to a patent attorney. If you can’t find it in your telephone book, ask for operator assistance.
click on Site Index. On the Site Index list select Agent and Attorney Roster.
It should be remembered that the patent attorney’s normal area of expertise is in counseling on how to protect an idea and in helping to obtain protection on an idea, whether it be in the form of patent, copyright, trademark, or trade secret. Usually, a patent attorney is not an expert in the specifics of engineering, manufacturing, or marketing of a new product, although almost all patent attorneys do have a degree in engineering or one of the physical sciences.
There are various places to seek this type of initial assistance, either for free advice or for a nominal charge. Often the independent inventor with an “idea” really